Samsung Electronics Forecasts 11% Revenue Increase in First-Quarter

Samsung Electronics has projected an 11 percent increase in revenue for the first quarter of the year, soaring to 71 trillion won compared to the corresponding period last year.
AI smartphone Galaxy S24 UltraThis milestone marks the first instance of the company’s quarterly revenue surpassing the 70 trillion-won mark since the conclusion of the fourth quarter of 2022. However, the tech giant refrained from disclosing its net income estimates for the quarter.

In 2023, Samsung witnessed a decline in sales, totaling 258.93 trillion won, reflecting a decrease of 14.3 percent from the preceding year.

In 2023, Samsung Electronics’ operating profit witnessed a significant drop of 84.9 percent year-on-year, plummeting to 6.56 trillion won, while net profit experienced a steep decline of 72.2 percent, reaching 15.48 trillion won.

Operating Profit

The surge in first-quarter operating profit is anticipated to exceed tenfold, driven by a resurgence in semiconductor prices which bolstered earnings from a subdued performance a year ago amidst a severe downturn in chip demand.

Samsung, the leading manufacturer of memory chips and televisions globally, forecasts its operating profit to reach 6.6 trillion won ($4.89 billion) for the quarter concluding on March 31st. This figure indicates a 931 percent increase from the previous year’s 640 billion won, representing Samsung’s highest operating profit since the third quarter of 2022.

Analyst Park Sung-soon from Korea Investor Relations Service attributed the surpassed expectations in operating profit to potential improvements in the inventory valuation of NAND flash chips, alongside an upswing in NAND demand which may have contributed to enhanced profit margins, Yonhap News Agency report said.

Additionally, the demand for the newly launched Galaxy S24 smartphones, featuring on-device AI, is expected to have a favorable impact on sales, particularly in the high-margin premium smartphone segment.

Detailed earnings for the quarter are slated for release on April 30th.

Chip Price Surge Boosts Samsung’s Performance

The upturn in Samsung’s performance is primarily fueled by its chip division, which is poised to report its first quarterly profit in five quarters. This resurgence comes as memory chip prices rebounded from a protracted slump initiated in mid-2022 owing to tepid post-pandemic gadget demand.

During the first quarter, DRAM chip prices witnessed a 20 percent increase compared to the previous quarter, while NAND flash chip prices surged by 23 percent to 28 percent, as reported by data provider TrendForce.

The optimistic outlook for memory chip demand, driven by a surging appetite for chips such as high-bandwidth memory (HBM) utilized in artificial intelligence chipsets, has propelled a 29 percent surge in Samsung shares over the past year.

Furthermore, the recent 7.2-magnitude earthquake in Taiwan is anticipated to further constrain semiconductor supply, potentially prompting memory chip manufacturers like Samsung and SK Hynix to implement steeper price hikes than initially planned, thereby potentially bolstering second-quarter earnings.

Samsung’s mobile business is also expected to report a robust profit following the successful launch of its flagship Galaxy S24 smartphones in late January. Eugene Investment & Securities estimates that Samsung shipped 57 million smartphones during the quarter, marking an 8 percent increase from the previous quarter, with the average selling price likely rising by 30 percent to $340 quarter-on-quarter, consequently supporting profits.

According to data provider Counterpoint, global sales of Galaxy S24 smartphones surged by 8 percent compared to the preceding year’s Galaxy S23 series during the initial three weeks of availability, Reuters news report said.

Though Samsung did not unveil detailed breakdowns of its various business segments, industry analysts anticipate a return to profitability for its semiconductor unit, which oversees the lucrative chip business, marking the end of five consecutive quarters of losses.

Market observers attribute Samsung Electronics’ impressive performance primarily to its semiconductor division, particularly its focus on high-value-added products like high bandwidth memory (HBM) chips for artificial intelligence (AI) systems, amid the surging prices of DRAM and NAND.

During an earnings call for the fourth quarter held in January, the company had signaled its intention to capitalize on the booming demand for HBM chips and solid-state drives (SSD) for servers to bolster its financial standing.

In line with its strategic objectives, Samsung Electronics has actively pursued the development of fifth-generation HBM chips, boasting 12 layers of DRAM chips with a capacity of 36 gigabytes, setting new industry benchmarks.

Financial forecasts by SK Securities Co. predict Samsung Electronics’ semiconductor business to rake in 1 trillion won in operating profit for the first quarter, while its mobile division is expected to generate 3.7 trillion won.

Echoing a similar sentiment, Eugene Investment & Securities Co. anticipates Samsung Electronics to report 900 billion won in operating profit from semiconductors and 3.8 trillion won from its mobile division.

Han Dong-hee, an analyst at SK Securities, attributed Samsung Electronics’ robust first-quarter earnings projection to its “profitability-oriented strategy,” emphasizing the company’s focus on HBM chips and the rebounding NAND prices.

Baburajan Kizhakedath